Agnico-Eagle sees $2,000/oz gold possible this year

An aerial view of Agnico-Eagle's Meadowbank mine and processing facilities in Nunavut, June 28, 2011.

Reuters/Euan Rocha

Agnico-Eagle Mines Ltd (AEM.TO) expects gold can reach $2,000 an ounce this year, propped up by investment demand for the precious metal amid a still weak global economy.

"Can it get to $2,000? Absolutely. Can it do that within the next year? Absolutely," said Sean Boyd, chief executive officer at the Canadian gold miner, in an interview at the Reuters Mining Summit on Monday.

Citing economic troubles in both Europe and the United States and renewed central bank buying of gold, Boyd said strong demand for the precious metal will continue to keep the price high for at least the next several years.

"I think it's just this level of uncertainty that remains out there that is going to keep people interested in gold," he said.

With credit problems continuing to haunt European countries, such as Spain, Portugal and Ireland, and areas of underlying weakness in the U.S. economy, Boyd said further quantitative easing measures are still not out of the question.

"We haven't really dealt with a lot of the fundamental issues that have driven people towards gold. And it's still one of the best stores of value and wealth out there," said Boyd.

Spot gold surged Monday to a two-week high of $1,687.90 an ounce after Federal Reserve Chief Ben Bernanke said faster growth will be needed to boost employment, supporting the view that further quantitative easing may be necessary. <GOL/>

"We've had a game changer in terms of central bank buying of gold. We had the opposite for so long, which basically ground the gold price down to the $250 level. I think that demand is going to continue," he said.

From late 1999 until late 2001 gold traded in a range from about $250 to $300 an ounce.

But Toronto-based Agnico-Eagle has always liked gold, its CEO said. In 55 years of mining it has never sold gold forward.

"So, we've always liked it," he said.

For budgeting at its mine sites, he said the miner takes a conservative view, using $1,500 an ounce for 2012.

Boyd said Agnico's ore reserves were roughly valued at $1,250 an ounce, and some of its mines ran at levels below $1,200 an ounce when figuring how much ore to take.

"I think where we are right now, it's still very constructive at the site level," he said.

New mine supply is also unlikely to hurt the price.

"People understand how difficult this business is. So, I think from a mine supply basis you may see some modest growth, but it's not going to hurt the price," the CEO added.

Asked whether the yellow metal will ever reach $5,000 an ounce as some observers predict, he said, "Who knows? But, I think things are relatively constructive. The early (economic) signs are good. But we saw those signs in early 2010 and in 2009 and then things weakened off."